Dr. David McGrogan’s piece ‘The Open Conspiracy Against Cash‘ shone a light on a subject which until recently has barely made the finance pages. A combination of lockdown shenanigans around cash and the general cultural drift to hyperbole and coarsening political discourse have brought it to the margins of the culture wars. Branded as a War on Cash and spiced up with conspiracy theories and tales of corporate malfeasance, it is a subject on the march towards the front pages. Given its new exciting status as a full-blown war, I offer this two-part guide to the supporters and enemies of cash. Today we look at what cash is and how its properties make it ideal for crime. In the next article we look at its opponents in the card industry, central banks and eCommerce, and ask whether a libertarian approach could help.
What is cash?
An amazing variety of objects have been used as currency, from giant 12-foot stone discs in Micronesia to ramen noodles in U.S. prisons. For the more inconvenient forms of tender, including gold, the receipt for its safe deposit formed the earliest banknotes. Once everyone had got used to the idea of using notes as currency it was only a matter of time before the gold itself could be sold off, at which point we only had the paper notes and were left with what is known as a fiat currency, the value of which rests on nothing more than social and legal consensus. This is cash and maintaining that legal and social consensus is the job of the Bank of England (BoE).
What is legally cash can be tricky. Take the much misused term ‘legal tender’. It has a narrow technical meaning relating to what is allowed to be used to settle past debts in court. What is allowed isn’t much, only coins of the Royal Mint, so strictly speaking Scottish and Northern Irish banknotes are not legal tender in either Scotland or Northern Ireland. The term legal tender does not apply to ordinary transactions where both parties are free to agree to accept any form of payment according to their wishes. A retailer can refuse to accept your £50 note and it can also refuse to accept cheques, cards or any cash at all.
If notes and coins are not available, not trusted or cannot be spent then other substitutes quickly arise, such as cigarettes or petrol. Given that legally parties can agree to use anything to settle payment, exactly what cash is takes on a subjective nature. Nevertheless, the war on cash is really about notes and coins, their widespread acceptance and their anonymity.
Cash vs the War on Crime
Cash and crime can be roughly split in two. Counterfeiting, which the BoE can influence through fancy counter-forgery technology, and everything else, over which it has no influence whatsoever. Those inventing penalties to deter forgers are not immune to its temptations themselves. Inducing hyperinflation by flooding an economy with counterfeit cash was used as a weapon of economic war by the British Government during the American War of Independence.
The real problem for the BoE is the ‘everything else’ bucket over which it has no influence. From the everyday evasion of VAT by your builder to the trade in nuclear gas centrifuge parts, cash is the lifeblood of crime. Your builder’s financial handywork might seem trivial to the economy but it adds up. Professor Ken Rogoff, author of The Curse of Cash and Professor of Economics at Harvard, calculated that in the U.S. black market cash transactions added up to $700 billion in 2016 alone. It is likely more in countries with higher regimes.
One interesting detail is that almost all cash-based crime is transacted in high denomination notes. In the U.S. there is about $1.4 trillion dollars of cash in circulation, about $4,200 for every American. Almost all of that $1.4tn is denominated in $100 bills. How many ordinary U.S. citizens are hanging on to 42 one-hundred-dollar bills? Quite, so where is it all? Europe has an even larger note, the €500, which became known as the ‘Bin Laden’ because it was so prominent in the funding of terrorism and everyone knew what it looked like but few people had ever seen one. Britain banned them in 2010 after research showed nine out of 10 Bin Ladens were in the hands of organised crime. Since 2019 European banks no-longer issue the €500 note but they are still legal currency, if you can find one. All those $100 bills are still in circulation, somewhere.
Proposals from the likes of Prof. Rogoff to withdraw high denomination notes are part of the war on cash. Rogoff’s opponents say it does not work and point to India’s withdrawal of the ₹2,000 note in 2016 which caused chaos. Rogoff responds that it was the way it was done, overnight rather than over decades and without wide-spread access to retail banking. Although he titled his book The Curse of Cash he does not advocate its elimination.
Serious crime – political corruption, terrorism, drug dealing, extortion and human trafficking – makes use of cash too. But just as running a large legitimate organisation on cash is effectively impossible, the same is true for organisation crime. Criminals need the services of the global banking system for the same reasons as everyone else, not least of which is that when you are working with criminals you don’t want a lot of cash around. Politicians who claim to have solutions to crime therefore do what politicians do and legislate that banks must know their customers (KYC), have procedures for anti-money laundering (AML) and sign up to Combating the Financing of Terrorism (CFT). In practical terms, knowing your customer means being able to identify them, are they really who they say they are, and trying to determine what they are up to. As we have no well-designed, privacy preserving identity system (I do not mean national identity cards) this explains why opening a bank account is a bureaucratic pantomime of utility bills and random Government-issued documents. In terms of knowing their customers’ activities, it is the banks that are frustrated because as I have pointed out before the payment systems run by banks do not know what it is that is being paid for, only the parties involved. The same is true for retailers, which is why they have so-called loyalty schemes, to link a customer to what he or she bought. Even with scant data on each transaction banks are quite ingenious in looking for patterns and anomalies. These days your bank usually spots your cloned or stolen card being used before you do.
KYC and AML legislation certainly makes banking more bureaucratic and forces it to hold huge amounts of personal data, but it has a more pernicious effect. KYC is explicitly intended to deter criminals from using banks, to make their lives more difficult. The corollary is that if you cannot qualify for a bank account you are in the same situation as a criminal. This puts those who legitimately cannot or do not want to use a bank into that category. If you turn up to your new employer and on being added to the payroll say you do not have a bank account you will have some explaining to do. Also in this category are children, foreign visitors and people with learning difficulties. This is not to say that banks would not like more people to have bank accounts, on the contrary. But when it comes to KYC children cannot be asked for payslips and council tax bills and children are easy prey for coercive adults wanting to open accounts for nefarious aims. Hence the phenomenon of money muling.
It is the anonymity and widespread acceptance of cash that criminals like. Anything with these properties works, it does not have to be cash. As more and more things can be bought online, where cash currently does not work, small-time criminals are increasingly preferring gift vouchers and pre-paid credit cards. Very large payments such as ransom fees demanded by organised crime default to Bitcoin. It has some of the anonymity of cash but is not as easy to spend, so it needs laundering through exchanges. Still, with proceeds of ransomware victims alone around $900 million last year they can afford some exchange fees.
Cash vs its handlers
Defending against cash-induced crime is expensive but those who have to handle it in large quantities, banks, retailers and post offices, have no choice. Cash needs to be kept in safes on insured premises and transported securely. Staff can find themselves working in locked security cages or behind Perspex screens and are at risk of robbery and worse. It is no wonder that retailers are not resisting dwindling cash usage. Advocates of a right to pay with cash don’t have much to say on the corresponding duties imposed on retail businesses and their staff. If the use of cash continues to decline, with increasing numbers of outlets now doing without it entirely, using the law to force every retailer to maintain cash handling paraphernalia could be an expensive, bureaucratic burden, akin to having to offer facilities for anyone choosing to arrive by horse or to pay in gold sovereigns.
To be continued
The case for cash is up against more than just law enforcement. In the next article it faces central bankers, card providers and apathetic politicians.
Stop Press: Trump has announced he will never allow CBDCs at campaign rally in New Hampshire.
Stop Press 2: Test your understanding of the issue by watching Glenn Grenwald interview Saifedean Ammous. How many mistakes and misunderstandings can you spot?
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“Burning electric cars must be dunked in baths of water to stop fires spreading”
…or perhaps we ought to have a moratorium about vehicles that spontaneously combust. Perhaps this isn’t the right technology to build our future on.?
They’re not so carbon neutral when they go up in flames, are they! Not to mention all the water needed to put them out. Probably equivalent to growing a couple of avocados for an eco activist’s brunch!
I’d like to see them get a lorry back builders skip and a 20ton crane into and underground car park! The ceiling is only 7ft high at best! Or, all this on a ferry or halfway down the channel tunnel!
“Richard Curtis regrets the way he wrote about women in his films”
I regret the way that Richard Curtis has curled up and died under pressure from his child about the use of the word ‘chubby’ to describe overweight people.
Chubby Checker, Fats Waller, King Tubby, Fats Domino…men who really couldn’t care less about such monikers of corpulence!
The article by Major General Charlie Herbert is a must-read. At last, we hear an expert voice on how the ground assault will not solve anything.
The move into Gaza will produce the desired, planned effect..
A global war..
This is The Great Reset Part 3….
If anything, it will be the breeding ground for even more radicalised terrorists. War begets war, only peace begets peace.
Very powerful piece by Scott Ritter;
https://www.sott.net/article/485173-Why-I-no-longer-stand-with-Israel-and-never-will-again
“Sir Patrick Vallance says release of full diary entries would breach human rights”Funny- he didn’t give a dam about human rights a few years ago.
‘Why has the Gaza ground invasion been delayed since Friday?’
“To achieve victory we must as far as possible make the enemy
blind and deaf by sealing his eyes and ears and drive his
commanders to distraction by creating confusion in their
minds”.
Mao Tse Tung, Protracted War, 1938
Hammas cares so much about the citizens they’re blockading the roads so they can’t evacuate South. More explained in this short video;
”The Israel Defense Force (IDF) slammed Hamas terrorists for blocking Gazan civilians from evacuating south as the IDF readies expanded operations in the strip, calling the move both “sinister and vile.”
“Hamas has both issued warnings to their civilians not to evacuate, and when people didn’t listen to those warnings of Hamas, they have actually stopped civilians, and have stopped convoys of Gazan civilians trying to flee from the situation,” IDF spokesman Lt. Col. Jonathan Conricus explained in a daily briefing shared to social media.”
https://www.breitbart.com/middle-east/2023/10/15/sinister-idf-blasts-hamas-stopping-gazan-civilians-evacuating/
This author explains how he thinks the Hamas attack was down to mainly incompetence and that the conspiracy theories are just that;
”Finally, Israel is a small country. A whole lot of people know each other and are related or friends with each other. This conspiracy theory requires you to believe that military personnel who had friends and family living in these communities decided to ignore calls for help and sit around playing cards while they were being butchered. Not to mention ignore attacks on their own bases and allow their fellow military personnel to be murdered, tortured, and taken hostage.
But since it is out there, let’s address it.
Most forms of this ‘trutherism’ claim that Israel’s security is so great and its intelligence apparatus so solid that there’s no way that the Hamas attack could have happened without some sort of complicity.
Sorry, no.
Libertarians, of all people, should know that governments are incompetent. Israel’s security is pretty compared to the United States because it actually tries to secure things. But it’s a long way from being secure. The best evidence of that is how many times it has failed.
Israel’s intelligence has been hyped a lot, but it’s mostly offensive intelligence. That means it’s pretty good at doing what it does now, learning the locations of enemy targets and taking them out. Its defensive intelligence has been a mixed bag at best. Israel’s track record at preventing terrorist attacks using intelligence is only a little better than ours.
Ask where a particular terrorist is and they stand a good chance of being able to answer, ask where the next terrorist attack is coming from, and the answer is no more useful than our color-coded homeland security alerts. There’s usually ‘chatter’ and some ‘sources’ say something, but ‘other sources’ say something else. Analysts pore over it and then someone higher up settles the debate.
Without having boots on the ground, Israel was relying on passive intelligence collection and on sensors and cameras, rather than on human intelligence sources and people who were actually paying close attention to what was going on.”
https://www.jihadwatch.org/2023/10/the-hamas-inside-job-truthers-dont-understand-israel-or-war
Lots of Israelis injected other Israelis with the experimental untested gunk.
Yes and that’s one good reason just in and of itself why Netanyahu has shown total disregard for the people of Israel, he turned that place into ‘Pfizer Nation’ and went full ‘Nazi’ on the citizens regarding the restrictions too, and if a bomb dropped on his head tomorrow I’m sure there’d be a party on the streets over there. I’m wondering if there was a poll just what his popularity would look like these days. If this current epic disaster is ‘political suicide’ then it’s a tragedy that he’s had to take so many innocent civilians with him, but he’s the one who at least still has breath in his body.
Struck by how the down-tickers have yet to explain why the don’t like your post. Can’t help feeling we all need to stand back and look at the bigger picture, the history and context of what’s going on. None of us can know the full details and social media just exacerbates the fear-mongering and division. So many lies, speculation and hatred that does nothing to help ordinary Israeli or Palestinian people, or humanity in general
Yes exactly. I just keep an open mind and listen to all angles really. Straight away I didn’t discount the idea it was an ‘inside job’ and found it hard to believe the IDF would not have had intelligence or let their guard down, so to speak, so that such a slaughter could ensue. Then when I heard Efrat Whatsername speak, who also is very doubtful this was just incompetence on the part of the military, I gave her more credence because she’s both Israeli and has served, whereas the above chap is American and I’ve no idea what his military expertise is, if any. However, he is allowed his opinion the same as anyone else, popular or not. But as you say, none of us know and it’s all just conjecture at the end of the day. Will the truth ever come out? Either way Netanyahu is finished.
‘U.K. lockdowns were a policy ‘failure’
No cost benefit analysis…..over £400bn spent with no cost benefit analysis…..bungling incompetence is far too generous an assessment. But it would be the triumph of hope over experience to expect this inquiry find in favour of criminal negligence…..which it so clearly should……
‘…..the Scientific Pandemic Influenza Group on Modelling (SPI-M-O)….failed to adequately assess the negative consequences of a nationwide lockdown.’
“The harms of the social distancing measures – particularly lockdown, the economic harms, the educational harms, the harms to access to healthcare, the harms to societal wellbeing … just the way we all function … mental health – were not included in any of the work that SPI-M-O did and, as far as I could tell, no one else was doing it either,”
“The question of how to avoid lockdown was never asked of us and I find that extraordinary.”
‘I think it’s fair to describe lockdown not as a public health policy, but as a failure of public health policy. [Lockdown] is what you do when all those other things you know you can do haven’t worked, it’s a last resort and it should always be that in my view.”
Reminds me to post this link to an excellent and succinct talk by Nick Hudson of Panda reviewing the evidence on the lockdowns and vaccines from an actuarial standpoint.
https://m.youtube.com/watch?v=hNcWbO1tY_E
Interesting 2min vid. It’s not all about the land therefore giving them more land is not the solution.
https://twitter.com/Lionroyboy/status/1714076217760981108
Double warning, by J Campbell: https://www.youtube.com/watch?v=_lyeO9IqJzc&list=WL&index=1 About the emerging abuse of power by the WHO & others.
This is very concerning – Reiner Fuellmich has been arrested:
https://celiafarber.substack.com/p/breaking-reiner-fuellmich-taken-from
https://www.europereloaded.com/reiner-fuellmich-taken-from-german-embassy-in-mexico-on-passport-errand-flown-to-frankfurt-and-arrested/
Indeed, very concerning especially as most judges in the West are corrupted.
https://www.bbc.com/news/health-67125230
Oh dear, showing copies of his written diary entries will contravene Unbalanced’s human rights, yet arresting someone – and looking towards prosecution – of someone just having thoughts, doesn’t?
Strange world.
I want to see the diary entry about the exponential growth graph. Is he so thick he believes epidemics grow exponentially never mind the laws of Maths nor the prior art from 1927 onwards.
Then butt out of Syria, Joe, and stop stealing their oil.
Hamas are terrorists. FACT
Ah, but facts can be partial. BBC